Our daughter, 5 years old, has coeliac disease. For those of you who don’t know what that is, coeliac (spelt celiac in American English) is an auto immune disease where the body attacks itself when gluten from wheat, barley or rye is eaten. The amounts of gluten that can provoke an attack vary from patient to patient but we are talking small amounts. A grain of flour is usually enough. When she was diagnosed we had to learn how to cook without gluten, we shifted our main carbs in the family to rice and spuds and separate cooking utensils, toaster, pots and pans, cutting boards and cupboards were needed. We are fortunate to have a reasonably large kitchen and keep a section of it totally gluten free. I used to bake all the family bread, now we only bake gluten free cakes and biscuits, the risk of aerial contamination from traditional four is too high. Consequences of provoking the disease are unpleasant for her and for us. Pain, illness, explosive vomit and diarrhea. Prolonged exposure results in weight loss, swollen abdomen, deficiencies in minerals and vitamins, pain, depression, mood swings, stilted development. There is assumed to be a 1% incidence in the UK population, however, diagnosis rates are much lower.

We had to learn how to shop again. Gone was the weekly trip to Sainsburys, we now had to track down the gluten free products we needed to buy from different stores. Not only to the shops carry different products but they don’t have consistent ranges from store to store. One Tesco may have a superb range of gluten free frozen products whereas another may not stock them at all. It makes the whole experience very tricky. It’s not just limited to specific ranges but to all sorts of items. Read the ingredients of many products and you will find they contain wheat, barley or rye gluten. In Sainsburys all own label sausages apart from the Toulouse ones seem to contain gluten. In Tesco it’s the opposite. Own label table sauces and ketchups frequently contain gluten as a thickening agent, Heinze Tommy K doesn’t. HP Sauce is a no no, Red Lion is fine etc etc.

In our town, Hexham, Northumberland, we are fortunate to have quite a choice of retailer. In addition to good market in the square every week there is a large Tesco, Aldi, and good mediums sized Waitrose, M&S and Iceland. 5 miles away is a Sainsbury, 20 miles away a huge Asda. Our shopping habits are usually – Aldi for 75%, Waitrose for 25% with fruit and veg coming from the market, when we are around, and dog food AND gluten free products coming from Tesco. Aldi is hopeless for specific gluten free products, although most of their own lable products are gluten free. Waitrose can be good but our store isn’t. So when we want to buy gluten free fish fingers, pizza, chocolate bikkies, croissant, chicken nuggets etc we go to Tesco. (Wait a minute, we shouldn’t be feeding our kid junk food – of course we don’t but in the real world time constraints and special teats mean that on occasion the kids do get pizza and why shouldn’t she be allowed to enjoy what her brothers and friends are eating?)

I do have a concern here. The average big 4 supermarket carries 30,000 different products on its shelves. The average discounter (Aldi/Lidl) carries about 1500. The discounter’s business model is to carry own label brands and to buy up and shift on quickly surplus branded products, hence the open pallet and cardboard boxes you see in the shop floor. Their own products are sold across Europe and benefit from a cultural lack of using gluten as a thickener/binding agent (remember the British Banger war Jim Hacker got into in Yes Minister?) However, stocking specific gluten free versions of food containing gluten is far removed from their business model. The big 4 have become community services, with dry cleaners, banks, insurance, clothes, chemists, and post offices they sought and seek to be everything to everybody. One of these services is to dedicate shelf space to specific free from foods giving those who suffer from food allergies and auto immune diseases as wide a range of ambient and frozen basic and luxury products as possible. They have been getting good at it and with the investment companies like Tesco, Genius and Warburtons have made in their gluten free ranges in the last 5 years we know that we can always get out hands on a loaf of fresh gluten free bread in a reasonably sized supermarket. This was never the case 5 years ago. Now whilst these products are considerably more expensive than normal products and you never see BOGOFs or discounts on them, the smaller turnover of them means that they won’t be large profit makers and the high cost of the ingredients and production means that they are expensive for the retailer to buy or make and are very unlikely to offer the potential margins that a discounter will be looking to make. Despite the increase in availability I’ve already mentioned that ranges stocked are not consistent across stores but it is improving.

Over the last 12 months, all the big 4 with the exception of Asda have seen a drop in their profits. An estimated £3billion less has gone through their combined tills during that time and has been spent instead at Aldi and Lidl who have seen sales growth of over 30% for the former and over 25% the latter. Meanwhile the big 4 are caught in a price war, with each other and with the discounters. They continue to slash prices of electronics, clothes etc to try and tempt back customers as they are unable to compete with the discounters on food and grocery. All this is having a knock on effect on suppliers who will be increasingly squeezed to cut costs, NPD etc. Analysts are concluding that this is now a fundamental change in retain behaviour by the British consumer and that gone are the days of the big weekly shop – people are now asking if the hypermarket be a sustainable model in the future?

As a customer who requires to buy gluten free products I’m concerned that not only NPD but also the availability of off the shelf gluten free products may well suffer. Ironically, more customer choice in terms of price will lead to less customer choice in products. It’s not as simple as transferring our loyalty and our 75% from Aldi to Tesco either, as I have already mentioned, only very rarely do Aldi and Lidl own label brands contain gluten in the ingredients. We can pretty much put anything in our trolley without having to read the ingredients to see if gluten is lurking in there. This isn’t the case at the big 4 but if we want to buy specific free from products we have to go to Tesco as whilst Aldi stocks gluten free bread and some products, the range and quality varies. (Gluten free bread, unlike wheat bread, has a huge variety in price, taste, quality and consistency from stuff that you could sole a shoe with to almost un noticeable from the real thing). If the continued rise of the discounter leads to the inevitable conclusion of big 4 closing stores and cutting back on ranges, off the shelf choices for those who require these foods will become less and less available. New product development, requiring subsidising from other ranges could fall when the financial pressure is felt. Aldi and Lidl are starting to stock these products.

Lidl Ireland’s 2013 Gluten Free Promotion

As already mentioned, Aldi carries a bread and in 2013 Lidl stores in Ireland had a large gluten free promotion and published a booklet. It will remain to be seen if the discounters start stocking large and comprehensive quality ranges of free from fresh, ambient and frozen products. To me it seems so removed from their business model I cannot see it happening rather, those requiring a reliable supply of these products will have to resort to web based specialist retailers and won’t be able to pop out for a packet of biscuits of a quality loaf of bread. If this isn’t the case, I would be very interested to hear from Aldi or Lidl about why it isn’t and what we could look forward to.

In the last 12 months we have seen a fundamental shift in the retail food sector in the UK. With the big 4 losing £3 billion in till receipts and the discounters seeing phenomenal growth, industry analysts are announcing a tectonic shift in the FMCG market in the UK. How is this going to affect our industry? Is this a threat or an opportunity?

Inflation hasn’t been followed by wage packets. Our economy is growing but our earnings aren’t. For years in the UK the consumer was happy to purchase from an increasingly smaller pool of suppliers. In energy and banking our options are limited, competition is nonexistent, anger and frustration rife, the only recourse the consumer has is government backed industry enforcers. Mrs Thatcher, love her or hate her had one thing right when she identified two biggest threats to individual freedom being big government and big business. By big business she meant companies that were so powerful they totally dominated their markets killing choice and competition. The reality of the credit crunch has changed consumers, whilst their options in banking and energy markets are limited, the one sector where they can show their new muscle is in their grocery bill and flexing them they are. Is our sector becoming the whipping boy for the frustrated consumer?

In the last 12 months £3 billion has left the tills of the big 4. Consumers are far more cynical, their shopping habits have moved from the convenience of a big weekly shop at one store, a new breed of canny shopper has emerged. Worryingly, for the big 4, there is evidence that the professional classes are now leading this anti-consumerism; the basics are bought in discounters and the luxuries in Waitrose and M&S. A recent Channel 4 Despatches Documentary last week identified this trend and anger in consumers who, rightly or wrongly, feel that they have been ripped off by the big 4 for years. Those doing a one stop weekly shop are now seen as wasteful, it’s fashionable to be canny. It’s a fundamental shift; probably the biggest in the last 20 years and it shows no sign of slowing down or changing.

So, what does this mean for those of us who work in the food manufacturing sector? Is this an opportunity or a massive threat? Whatever it is, the speed of the change will have huge implications.

Are our business models fit for purpose?

The average big 4 superstore has over 30,000 products on its shelves, the average discounter, 1,500. What does this mean for the manufacturer? Our business models have been honed to service the demanding buyers of the big 4. Customer auditors have lorded it over our factories. The demands of the big 4 have been brutal and the level of control such that they have been able to effectively dictate to suppliers for years. We all have war stories of how the big 4 have enforced their demands. The problem is, that we have, through necessity, complied with these demands. This has created models that are ideal for servicing the big 4 but with the disintegration of their power, how relevant are they for the future? The consumer seems to want basics that are more basic and luxuries and fresh that are local, have provenance and high quality. Those suppliers wholly dependent on big 4 supply contracts could be in for a very nasty time.

The big question is, what can we do about it? Are our businesses sufficiently savvy and fleet of foot to cope with the changes in the market?